Genesco Speaks

To read how courts are coping with the M&A fallout from the credit crisis, click here.

Roger Sisson is senior vice president, secretary and general counsel of Genesco Inc. He has been with the Nashville, Tenn.-based company since 1994. A few weeks before heading into trial in New York, Sisson sat down for a Q&A session with InsideCounsel.

IC:Did you ever consider renegotiating the deal or reaching a settlement out of court?

RS: Not seriously before we brought the [Tennessee] lawsuit. We had a buyer [Finish Line] who apparently came to the conclusion that it just really didn't want to do the deal, and that really had more to do with not wanting to do the transaction at all than with the price of the deal. We also had a financing source, UBS, that was not willing to finance the deal. There was not really a good basis for renegotiation.

IC:How has the economy affected this deal?

RS: The major economic change that affected the dynamic of the deal was the credit market collapse in mid-summer. It made the financing package less attractive to UBS, and it caused them, apparently, to doubt their ability to syndicate the debt that would be necessary to finance the deal. When we were negotiating the merger agreement back in late spring and early summer [2007], the credit markets were still very healthy, and leveraged transactions were being completed very favorably. So the fact that this transaction was going to be highly leveraged was evidently not troublesome either to UBS or to Finish Line. We signed the merger agreement June 17, and within a month the credit markets had collapsed. I think that really changed Finish Line's and UBS' view of the matter.

IC:Is market practice changing in response to the credit crisis?

RS: I think it'll be interesting to see how things settle out with some distance after this. We're still in the middle of this. We have the unusual experience in litigation of going--in a three-month time period--from filing the complaint to entry of the judgment in the Tennessee case. It seems like a lifetime since this all began, but it's really still going on. I think practitioners will learn lessons from all these deals that have run into trouble. I suspect that practice will be sharpened up.

IC:What lessons have you taken from this experience?

RS: I don't know of anything at the moment that I'd do differently. I suspect that with a year or two's distance I may be able to think of things. I believe that we took the only course that was open to us. The whole thing started for us when we got an unsolicited takeover bid from Foot Locker late last winter. As that developed, the board of directors decided that the best interest of shareholders would be served by sale of the company. Once you get into that "Revlon" mode [in which the board of a company that is voluntarily up for sale must accept the best offer for its shareholders], it's just a question of taking the highest and most certain bid, and Finish Line came in with a cash bid accompanied by a strong commitment letter that essentially cleared the field in terms of bidders. We went with the bid that we had to go with, essentially, and we drafted a strong merger agreement that protected us as well as we could have been protected in the circumstances. I think we have persevered and made great progress in our effort to enforce the merger agreement on behalf of our shareholders.

IC:How will the Tennessee case affect the trial in New York (which is set for March 3)?

RS: The New York case is on a very limited issue, and that is whether or not the merged entity will be solvent. So the Tennessee case has limited direct relevance to the New York case, but I think it provides an obvious background for the judge in New York to understand the case to the extent that there are questions about underlying facts and so forth. But the legal issues in the two cases are distinct from each other.